Knight Capital Reports Profit Decline on Trading Slump

Jan. 24 (Bloomberg) -- Knight Capital Group Inc., the
market-maker that agreed to be sold to Getco LLC, reported
earnings declined 84 percent after trading slowed and stock-price swings narrowed.

Fourth-quarter profit was $6.5 million, or 1 cent a share,
compared with $40.2 million, or 43 cents, a year ago, the Jersey
City, New Jersey-based company said today. Excluding some items,
such as an investment writedown and legal fees related to the
takeover, earnings were 5 cents a share, exceeding the 3-cent
average analyst estimate, data compiled by Bloomberg show.

Volume is down 18 percent from a year ago, while volatility
as measured by Chicago Board Options Exchange Volatility Index
has reached its lowest level since the 2007 financial crisis, as
corporate earnings and economic reports in the U.S. improved.
Knight, whose market-making segment accounts for almost half of
revenue, benefits from bigger price swings because it can
capture more revenue with each transaction.

“The financial results for the quarter were negatively
impacted by the steep year over year declines in consolidated
U.S. equity volume and market volatility as well as the write-down of an investment and heightened professional fees,” Chief
Executive Officer Thomas Joyce said in today’s statement.

Knight shares climbed 0.5 percent to $3.71 today, extending
the 2013 gain to 5.7 percent, compared to 7.3 percent for the
NYSE Arca Broker/Dealer Index that tracks the company and 10 of
its rivals.

Average daily volume for U.S. exchange-listed stocks
declined 18 percent to 6.07 billion from a year ago, while the
VIX averaged 16.8 last quarter, compared with 29.9 in the last
three months of 2011, data compiled by Bloomberg show.

Knight Revenue

While revenue declined 16 percent to $287.7 million, it
also beat the average analyst estimate of $283.7 million.

Knight agreed to be sold to Getco in a $1.4 billion deal
last month, after it lost more than $450 million when its
computers generated a flood of erroneous orders in August.

Joyce said today the company plans to combine its full-service and electronic institutional equity sales team. The
group will be led by Joseph Mazzella, head of institutional
equities, and Albert Maasland, head of international. David
Lehmann, head of electronic execution services, will leave
Knight.

The company also said it will discontinue its correspondent
clearing business and Steven Sadoff, who heads it, will leave.
Sadoff had been in charge of operations and technology
previously.